How to Buy Good Stock for Less Without a Broker
Finding good stocks isn't hard. There are thousands of well-established companies listed on the New York Stock Exchange, NASDAQ and other stock exchanges. However, a lot of people would like to buy good stocks for less without a broker. Well, you can. Not only that, if you have limited funds, you can still buy good stocks with much smaller minimum investments than brokers require. Almost 2,000 companies (as of 2009) offer direct stock purchase plans (DSPPs) that allow you to invest small amounts through a transfer agent (instead of a brokerage firm) that charges only a low transaction (processing) fee.
Other People Are Reading
Instructions
-
-
1
Find companies that offer direct stock purchase plans. You can start by checking the listings of commercial transfer agents like Sharebuilder (sharebuilder.com) and Computershare (computershare.com). If you don't find the stock you are interested in there, go to the company's Investor Relations section of their website. If they have a DSPP it will be listed there along with contact information for the company's transfer agent. Companies that offer DSPPs include well-known names like Sears, The Home Depot, Casio Electronics, Wal-Mart and Capitol One.
-
2
Do your homework to determine if a company's stock is a good investment for you. Get a copy of the company's annual report (usually available online). Check to see if the company's stock has done at least as well as its industry average for the past five years. Examine the company's current revenues, earnings and balance sheet to decide if it is positioned to continue good performance.
-
-
3
Open a direct-stock-purchase plan with the company's transfer agent. You can do this by either ordering a paper application or filling out an application online. There is a one-time setup fee of $10 to $25. The minimum investment for most plans is $250 to $500. If you invest through electronic funds transfer, the transaction fees are $1 to $3 plus 3 cents to 5 cents per share for each transaction. Some companies (Exxon Mobil, for example) even pay these purchasing fees, so all of your investment goes into buying stock.
-
4
Arrange to have $50 per month (this is the usual minimum) automatically transferred from your checking account to your DSPP. This isn't mandatory, but by agreeing to automatic debits, you can satisfy the minimum investment requirement over a period of several months. It's also a convenient way of continuing to invest on a regular basis.
-
5
Select the optional features that best meet your needs. DSPPs can be set up as traditional or Roth IRAs. Most also provide stock certificate safekeeping and automatic dividend reinvestment at no charge. Some companies include special features. For instance, McDonald's Corporation has a plan for minors to start their own direct stock purchase plan for as little as $100.
-
1
Tips & Warnings
DSPPS are intended for long-term investors. Because of this, while transaction fees for stock purchases are low, fees for the sale of stock are a good deal more. Typically a sale costs $10 to $30 per transaction plus 5 cents to 15 cents per share.
